SOURCE: Vangent

August 12, 2008 08:00 ET

Vangent, Inc. Announces Second Quarter 2008 Results

ARLINGTON, VA--(Marketwire - August 12, 2008) - Vangent, Inc., a leading global provider of information management and strategic business process outsourcing services, today announced its second quarter 2008 results.

"We are pleased with our second quarter results, which were consistent with our expectations," said Mac Curtis, President and Chief Executive Officer of Vangent. "On a quarter over quarter basis, revenue and profitability for the second quarter were relatively stable, providing a solid position for the second half of the year which is the busiest time for Vangent."

Curtis continued, "On a year to date basis, revenue was up $34.5 million, we reduced our net loss by $8 million and increased our Adjusted EBITDA by $7.1 million in the first six months of the year. We are excited about the solid traction we gained so far this year and look forward to a successful 2008 and beyond."



Financial Summary (unaudited)
(Dollars in Millions)

                        Three Months Ended             Year-to-Date
                    --------------------------  --------------------------
                      June 30,      June 28,      June 30,      June 28,
                        2007          2008          2007          2008
                    ------------  ------------  ------------  ------------
Revenue             $      121.6  $      123.9  $      232.9  $      267.4
Net Loss                   (10.2)         (8.6)        (19.0)        (11.0)
Adjusted EBITDA             12.9          12.1          24.8          31.9
Credit Agreement
 Adjusted EBITDA            15.5          12.1          30.5          31.9

                                                December 31,    June 28,
                                                    2007          2008
                                                ------------  ------------
Cash and Cash
 Equivalents                                    $       26.1  $       30.4
Long -Term Debt                                        428.2         420.4
Contract Backlog                                     1,769.9       1,789.4
Firm Contract
 Backlog                                               408.4         649.2



A reconciliation between certain non-GAAP financial measures and reported financial results is provided as an attachment to this press release.

Q2 2008 Financial Results Conference Call: Will take place on Tuesday, August 12 at 11:00 am ET. Interested parties may call (888) 694-4702 and request the "Vangent Q2 2008 Financial Results Conference Call," conference ID # 56353005.

Audio Replay: A replay of the earnings call can be heard after 2 p.m. on August 12, 2008 until August 19, 2008. To hear the replay, dial (800) 642-1687 and enter the same conference ID # 56353005. For interested parties outside the U.S. and Canada, dial (706) 645-9291 and enter the same conference ID #.

Vangent's second quarter financials including the Management Discussion and Analysis will be made available on the company's website at www.vangent.com following the completion of the Vangent Q2 2008 Results Conference Call.

About Vangent, Inc.

With over 5,000 employees worldwide, Vangent, Inc. is a global provider of Consulting, Systems Integration, Human Capital Management and Strategic Business Process Outsourcing services to the U.S. federal and international governments, higher education institutions and corporations. Clients include the Centers for Medicare & Medicaid Services, the U.S. Departments of Defense, Education, Health and Human Services and Labor; and the U.S. Office of Personnel Management, as well as Fortune 500 companies.

Headquartered in Arlington, Virginia, the company has offices throughout the U.S. and in the U.K., Canada, Mexico, Venezuela and Argentina. Additional information can be found at: www.vangent.com.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "projects," "likely," "will," "would," "could" and similar expressions or phrases identify forward-looking statements. All forward-looking statements involve risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this press release might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



Vangent, Inc.  (formerly Pearson Government Solutions Business)
Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)


                                          Predecessor
                       Successor Entity     Entity     Successor Entity
                     --------------------  ---------  --------------------
                      Three      Three     Period      Period      Six
                      Months     Months    January 1   February    Months
                       Ended      Ended      to         15 to      Ended
                     June 30,   June 28,  February 14, June 30,   June 28,
                       2007       2008       2007       2007       2008
                     ---------  ---------  ---------  ---------  ---------
Revenue              $ 121,584  $ 123,934  $  58,833  $ 174,046  $ 267,409
Cost of revenue        102,712    105,934     48,187    150,113    223,100
                     ---------  ---------  ---------  ---------  ---------
Gross profit            18,872     18,000     10,646     23,933     44,309
General and
 administrative
 expenses               12,944     12,473      9,383     18,438     26,257
Selling and
 marketing expenses      4,544      4,075      1,940      6,849      8,206
                     ---------  ---------  ---------  ---------  ---------
Operating income
 (loss)                  1,384      1,452       (677)    (1,354)     9,846
Interest expense         9,795      8,958         34     14,560     18,176
Interest income           (201)      (181)       (44)      (201)      (449)
                     ---------  ---------  ---------  ---------  ---------
Loss before income
 taxes                  (8,210)    (7,325)      (667)   (15,713)    (7,881)
Provision (benefit)
 for income taxes        1,984      1,228       (292)     2,936      3,096
                     ---------  ---------  ---------  ---------  ---------
Net loss             $ (10,194) $  (8,553) $    (375) $ (18,649) $ (10,977)
                     =========  =========  =========  =========  =========





Vangent, Inc.  (formerly Pearson Government Solutions Business)
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)



                                                        December    June
                                                        31, 2007  28, 2008
                                                        --------- ---------
Assets
Current assets:
  Cash and cash equivalents                             $  26,093 $  30,426
  Trade receivables, net                                  112,292    98,799
  Other receivables and prepaid items                      15,470    20,355
                                                        --------- ---------
Total current assets                                      153,855   149,580
Property and equipment, net                                27,579    32,678
Goodwill and intangible assets, net                       499,900   492,859
Deferred debt financing costs and other                    12,734    11,936
                                                        --------- ---------
Total assets                                            $ 694,068 $ 687,053
                                                        ========= =========

Liabilities and Stockholder's Equity
Current liabilities:
  Current portion of long-term debt                     $   7,325 $       -
  Accounts payable and accrued expenses                    63,248    69,371
  Accrued interest                                          8,547     8,007
  Other                                                     5,296     4,103
                                                        --------- ---------
Total current liabilities                                  84,416    81,481
Long-term debt, net of current portion                    420,875   420,366
Other liabilities                                           8,488    13,655
                                                        --------- ---------
Total liabilities                                         513,779   515,502
Stockholder's equity                                      180,289   171,551
                                                        --------- ---------
Total liabilities and stockholder's equity              $ 694,068 $ 687,053
                                                        ========= =========





Vangent, Inc.  (formerly Pearson Government Solutions Business)
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)



                                          Predecessor
                                             Entity     Successor Entity
                                           ---------  --------------------
                                            Period      Period      Six
                                           January 1  February 15  Months
                                              to          to       Ended
                                          February 14, June 30,   June 28,
                                              2007       2007      2008
                                           ---------  ---------  ---------
Cash flows from operating activities
Net loss                                   $    (375) $ (18,649) $ (10,977)
Depreciation and amortization                  2,369     13,353     17,365
Equity-based compensation expense              1,477          -        592
Deferred income taxes                            (19)     2,337      2,913
Net change in operating assets and
 liabilities                                 (22,348)    26,116     11,283
                                           ---------  ---------  ---------
Net cash (used in) provided by operating
 activities                                  (18,896)    23,157     21,176
                                           ---------  ---------  ---------

Cash flows from investing activities
Acquisition, net of cash acquired                  -   (615,206)    (3,936)
Capital expenditures                          (3,727)    (2,082)    (5,041)
                                           ---------  ---------  ---------
Net cash used in investing activities         (3,727)  (617,288)    (8,977)
                                           ---------  ---------  ---------

Cash flows from financing activities
Proceeds from issuance of common stock             -    203,466          -
Proceeds from issuance of long term debt,
 net of repayments                                 -    429,400     (7,834)
Debt financing costs                               -    (14,013)         -
Investment from parent and other              13,271       (110)      (138)
                                           ---------  ---------  ---------
Net cash provided by (used in) financing
 activities                                   13,271    618,743     (7,972)
Effect of exchange rate changes on cash
 and cash equivalents                           (166)       389        106
                                           ---------  ---------  ---------
Net (decrease) increase in cash and cash
 equivalents                                  (9,518)    25,001      4,333
Cash and cash equivalents, beginning of
 period                                       11,713          -     26,093
                                           ---------  ---------  ---------
Cash and cash equivalents, end of period   $   2,195  $  25,001  $  30,426
                                           =========  =========  =========






Vangent, Inc. (formerly Pearson Government Solutions Business)
Reconciliation of GAAP to Non-GAAP Measures
(in thousands)
(unaudited)



                                                                  Twelve
                      Three Months Ended       Year-to-Date       Months
                     --------------------  --------------------   Ended
                     June 30,   June 28,   June 30,   June 28,   June 28,
                       2007       2008       2007       2008       2008
                     ---------  ---------  ---------  ---------  ---------
Net loss             $ (10,194) $  (8,553) $ (19,024) $ (10,977) $ (14,377)
Provision for income
 taxes                   1,984      1,228      2,644      3,096      6,657
Interest expense,
 net                     9,594      8,777     14,349     17,727     36,810
Depreciation and
 amortization            8,912      8,946     14,867     17,365     34,392
                     ---------  ---------  ---------  ---------  ---------
EBITDA                  10,296     10,398     12,836     27,211     63,482

Equity-based
 compensation
 expense                     -        345      1,477        592      1,501
TSA adjustment              12         16      1,151         36        213
Net transition and
 contract settlement
 costs                   2,288      1,011      8,765      3,426     12,161
Management fee             287        306        537        587        964
                     ---------  ---------  ---------  ---------  ---------
Adjusted EBITDA         12,883     12,076     24,766     31,852     78,321

CMS contract
 normalization           2,704          -      5,817          -          -
TSA expenses               (46)         -        (35)        19        148
                     ---------  ---------  ---------  ---------  ---------
Credit Agreement
 Adjusted EBITDA     $  15,541  $  12,076  $  30,548  $  31,871  $  78,469
                     =========  =========  =========  =========  =========



The net loss of $19.0 million for the six months ended June 30, 2007, represents the mathematical addition of the net loss of $0.4 million for the Predecessor Entity for the period January 1 to February 14, 2007, and the net loss of $18.6 million for the Successor Entity for the period February 15 to June 30, 2007.

EBITDA is defined as net income (loss) before interest, income taxes, and depreciation and amortization. Management uses this measure as an indicator of operating performance. EBITDA is not an indicator of financial performance under generally accepted accounting principles ("GAAP"), or a measure of liquidity and may not be comparable to similarly captioned information reported by other companies. In addition, it should not be considered as an alternative to, or more meaningful than, income (loss) before income taxes, cash flows from operating activities, or other traditional indicators of operating performance.

Adjusted EBITDA is adjusted to exclude (i) equity-based compensation expense, (ii) non-recurring contract settlement costs, (iii) legal expenses payable by Pearson in connection with an investigation into a contract awarded to NCS Pearson, Inc. by the Transportation Security Administration ("TSA") in 2002 and all potential reserves related to the potential settlement of such claim, and (iv) certain costs resulting from our separation from Pearson plc net of certain overhead and infrastructure costs.

Credit Agreement Adjusted EBITDA is adjusted to normalize the operating income of a certain HHS contract and to exclude TSA related expenses.

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